28th Sep 2016 09:15
LONDON (Alliance News) - AFI Development PLC on Wednesday said it has avoided selling off assets in order to repay its substantial debt pile after striking a deal with its lender, which has agreed to defer quarterly payments and remove existing covenants that have been breached.
AFI Development shares were down 21% to 0.125 pence per share on Wednesday morning.
The Russian real estate fund was expected to make payments earlier this year totalling USD8.3 million before the end of June to its Russian lender VTB Bank PJSC but opted not to pay up and applied for a deferral as the pair held discussions about potentially amending the company's debt facilities.
AFI Development has an outstanding balance of around USD614.0 million and assets were expected to be sold in order to pay off the debt, but the company's Chairman Lev Leviev has been holding talks with the bank about an alternative proposal.
Shareholders had approved the disposal of assets to clear the debt back in August, but AFI Development will no longer carry out that plan following the deal struck Wednesday.
VTB Bank has agreed to defer the quarterly principal payments due on the loan facility agreements until they each mature and has removed the covenants from the Ozerkovskaya III loan facility which had been breached.
The payments due earlier this year that were not paid plus any future payments related to Ozerkovskaya III will now not be payable until January 26, 2018. The total outstanding balance for the Ozerkovskaya III facility is USD220.0 million.
In return, the bank asked for additional security against the loans, including cross default provisions between each of the loans and a suretyship from its subsidiary Bellgate Constructions Ltd for the Ozerkovskaya III facility.
Suretyship is a specialised line of insurance but essentially provides a guarantee that AFI Development will meets its obligations. The issued share capital of Bellgate has now been pledged against the AFIMALL City loan facility and the Ozerkovskaya III facility. Notably, Bellgate holds the company's AFIMALL project.
In addition, Leviev has provided a personal guarantee for the balance owed under the Ozerkovskaya III facility. The guarantee is for 10 months and is seen as "additional security" to the other agreements made.
Importantly, if Leviev is required to pay any of the outstanding balance, it will create a new loan that the company will have to repay which, if it occurs, would carry an interest rate of 7.0% and be payable on a quarterly basis.
It is unsurprising that Leviev has stepped up to sign the agreement with the bank as he holds around 65% of AFI Development.
Importantly, AFI Development said it expects to sign further agreements with the bank over the next 60 days to give extra security to the lender.
AFI Development will pledge 100% of the share capital of Titon LLC, which holds the company's Kossinskaya project, and Semprex LLC, which holds the company's interest in the Aquamarine Hotel.
By Joshua Warner; [email protected]; @JoshAlliance
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